Wednesday, February 28, 2007
TXU and the Great Waste
I would speculate that for the average consumer a business story that makes it onto the nightly news not only makes no sense, it also leaves no impression. And into that category must fall the story of the proposed buyout of TXU Corp., Texas' largest electric utility.
If all goes according to plan, TXU will cease to be a public corporation and go into private ownership, which means among other things that it will escape all the nasty reporting requirements of the Securities and Exchange Commission (SEC). But the reason this story made it into the headlines is the sheer size of the transaction. According to David Koenig, this is the largest transfer to private ownership ever, beating the record set in 1988 when Kohlberg Kravis bought all the cookies from RJR Nabisco.
There really is nothing to fear in this—
Former Secretary of State James A. Baker III will serve as advisory chairman to the buyout group, and [former EPA chief] Reilly and former Commerce Secretary Donald L. Evans will join the TXU board if the deal goes through.
And if that's not reassuring enough, Henry Kravis, a principle in one of the groups hoping to swallow TXU whole has "pledged to make TXU into 'a more innovative, customer-centric, environmentally friendly company.'" So don't be petty.
The environmental benefit
In announcing the proposed buyout excited reporters spoke of a win-win situation in which environmentalists would "win" an agreement to reduce the number of planned coal-fired generating plants from 11 down to 3. While the meaning of the "win" for environmentalists and other affected parties was clear enough, many news accounts neglected to spell out the corresponding win for the new owners, but you wouldn't be far wrong if you assumed some additional billions in profits.
As consumers and as citizens we have grown accustomed to the notion that any manure deposit smaller than a truck load should be counted as a "win." So the announcement of the cutback in the number of coal-fired plants left Tom Smith, director of Public Citizen in Texas, "stunned and elated." After all, with Texas growing faster than the reproductive rate of Mexico, the state was facing what TXU had dubbed a "power crisis." Where to get all those additional megawatts if not from coal?
But Tom Fowler noticed that the problem seems to have been solved almost overnight—
Just a week ago, Texas was facing a power crisis in the coming years if the state didn't green-light TXU's plans to build 11 coal-fired power plants.
At least that's what TXU and its supporters said.
What a difference a few days can make.
TXU said Tuesday it's now prepared to bring as much as 1,400 megawatts of mothballed natural gas-fired power generating capacity back on line to meet the state's power needs in the coming years. One megawatt can power as many as 800 homes.
The coal plants will be replaced with a doubling of wind power purchases, a $400 million commitment to conservation programs to reduce the need, and the return to service of the gas plants.
How could it have been so simple?
Strong statements that rolling blackouts were on the way if the coal plant projects didn't move forward were simply exaggerations, said David Hawkins, director of the Natural Resources Defense Council's climate center and one of the parties to the agreement with the investors.
"It had nothing to do with the needs of Texas citizens and reliability," Hawkins said. "It was simply an exercise in trying to dominate the field. It was literally a power play."
And thus is our energy policy decided at the state and national level.
The environmental groups that agreed to drop their opposition and "get on board"—the Natural Resources Defense Council and Environmental Defense—are either being had or being paid. As analyst James Lucier of Prudential Equity Group expressed it for NPR—
I think the environmental groups are being used as window dressing for a deal that's really driven by strong economic fundamentals.
I cannot hear a story dealing with the great problems of our age—energy, environment, global warming, health care1—without thinking of the war on Iraq—"The Great Waste." But the U.S. media don't like that characterization. They will not tolerate the notion that the war is wasting lives, as Barack Obama recently discovered. And they similarly reject the notion that the war is a waste of money, since by some circular reasoning the money is being spent to "support our troops."2 But we must not allow ourselves to be flummoxed. From the viewpoint of an ordinary citizen this war is nothing but a waste of lives and money. Yet where there are losers there are also winners, and "our" war is truly a cash cow for the wealthy.
In January I wrote a brief post on some of the problems of health and education that might be improved by money wasted in this war. But the TXU scam brings home the wasted opportunity for helping to heal the environment.
For heaven's sake! For a trillion bucks the government could offer tax credits and grants to insulate every building in the country and maybe give us a hybrid automobile in the bargain, thus reducing both the need for oil and additional generating capacity.
You can tell I'm off my lithium, can't you? The federal government would never consider a course of action benefiting so many citizens at once. It would only make us lazy.
What to do? What to do!
Brian Huyser, among others, is promoting a simple idea. He wants everyone to change out their incandescent bulbs for compact fluorescent lights, or CFLs. According to his calculations CFLs can reduce your monthly electric bill by 50 to 75 cents per bulb, which can add up if you have a lot of lights. If we could make CFLs as popular as, say, the pet rock, wonderful benefits could accrue.
Huyser's goal is to replace one billion incandescent bulbs. At his website Huyser writes,
Imagine if people all over the world mobilized to replace one billion standard incandescent light bulbs with energy-efficient compact fluorescent (CFL) light bulbs. What would that mean? It would mean that those people would save money each month on their electricity bill. It would mean they would save enough energy to light tens of millions of homes for a year. It would mean the prevention of greenhouse gases equivalent to the annual emissions of millions of cars.
The website features a map of the states showing the extent to which each state has proportionately moved toward Huyser's goal. Texas, naturally, is at the bottom. So I looked up some statistics and did a down-and-dirty calculation—
In 2005 Texas had over 9 million housing units. Let's make the extravagant assumption that 1 million of them already use CFLs. So suppose that the remaining housing units decide to replace just four 60-watt bulbs with the equivalent 18-watt CFL, a reduction in power requirement of 42 watts per bulb.
We then have—
8,000,000 housing units x 4 bulbs x 42 watts = 1,344,000,000 watts = 1,344,000 kilowatts = 1,344 megawatts of power.
Tom Fowler, noted above, wrote that 1 megawatt is sufficient to power 800 homes. So the great state of Texas could add over a million additional housing units without requiring a single additional coal-fired plant merely by convincing every household to replace four 60-watt bulbs with an 18-watt equivalent. The main drawback is that friends of the Bush's won't make quite as much money by diddling consumers out of their energy dollars.
I say we give it a try!
2This evening NPR commentator Daniel Schorr noted that the federal government is not meeting its commitment to the states to fund a program for child health care. Noticing the generous funding for the Defense Department, he suggested that children's health should be "redefined as a defense program meant to ensure a supply of healthy young people for future wars." [back]